The Power of Ideas? The Possibility of a Myth of Shareholder Value

Abstract

Of late, the business news has battered the reputation of modern capitalism as rational and efficient. As portrayed in the headlines, leaders of industry appear driven by status anxiety and hormones and pride, as well as greed of impressive proportions, rather than the pursuit of efficient production and expanded market share. In “Corporate Malfeasance and the Myth of Shareholder Value,” Frank Dobbin and Dirk Zorn explore the sources of this latest outbreak of speculation and fraud. They locate the source in the new power of business professionals, specifically stock analysts, in constructing a metric of value driven by the expected earnings (or losses) of publicly held companies. As executive compensation included ever-larger quantities of stock options, executives and stock analysts, along with institutional investors, have become entwined in a system of incentives which encourages the manipulation of these expectations, often at the expense of sustaining a productive and profitable enterprise. Rather than being driven by status anxiety, hormones or greed, financial misbehavior is both rational and rewarding.

Citation

Clemens, E.S. (2005), "The Power of Ideas? The Possibility of a Myth of Shareholder Value", Davis, D.E. (Ed.) Political Power and Social Theory (Political Power and Social Theory, Vol. 17), Emerald Group Publishing Limited, Leeds, pp. 207-212. https://doi.org/10.1016/S0198-8719(04)17008-7